Wednesday, August 19, 2009

Morning Briefing for August 19th: Renewed Weakness

As we can see from the S&P 500 e-mini (ES) chart above, we are trading much weaker before the market open, looking to test Monday's lows after a bounce yesterday fizzled in the afternoon. The weakness once again places us below the 8/12 lows--yesterday's bounce being a failed attempt to return to the prior multi-day trading range--and sustains our short-term market downtrend. Note from my morning tweet that the trend status of the market has indeed shifted significantly in the past several days: of the 40 stocks in my basket, we now have only 12 trading in short-term uptrends, 14 in neutral mode, and 14 in downtrends.

Intermarket themes are generally reflecting risk aversion, with selling in gold and oil, strength in the U.S. dollar, and buying of 10-year Treasury notes. To this point, however, the risk aversion has not brought us back to Monday levels in those markets. That has me looking closely at those themes in early trading today to help handicap the odds of sustaining a move in stocks below the Monday lows.

Quick reminder: I'll be doing a free trading psychology webinar today after the market close, with a focus on "best practices". One little extra I'll be providing is an update on relative volume norms, to help traders ascertain levels of institutional activity in the stock market (as well as expectable volatility).